NEW YORK (360Dx) – Laboratory Corporation of America today reported a 13 percent year-over-year revenue growth for the second quarter 2018, driven largely by acquisitions.
LabCorp revenues for the quarter ended June 30 were $2.87 billion, up from $2.53 billion in the same quarter last year. The consensus Wall Street revenue estimate for the quarter was $2.85 billion.
Revenue at LabCorp Diagnostics for the quarter was $1.81 billion, up 5 percent from $1.72 billion in the same quarter last year, primarily driven by acquisitions, organic volume measured by requisitions, and an approximately 30 basis point benefit from foreign currency translation. LabCorp Diagnostics' acquisition of Mt Sinai's outreach business, and Pathology Associates Medical Laboratory annualized in May, according to Glenn Eisenberg, executive vice president and chief financial officer.
Growth in the diagnostics division was partially offset by the impact of new reimbursement rates created by the Protecting Access to Medicare Act, Eisenberg said on a conference call following the release of the financial results. He cited the new rates, which went into effect in January, as the primary reason for a 0.7 percent decrease in revenue per requisition in the quarter.
A key development in the quarter was the company's signing of "significant multiyear agreements with UnitedHealthcare and Aetna," David King, LabCorp chairman and CEO said.
King acknowledge the new contracts may reduce the company's revenue, due to the fact that UnitedHealthcare, for which LabCorp had previously been exclusive healthcare provider, is larger than Aetna, which has previously been served exclusively by Quest Diagnostics. Both insurers signed agreements with Quest as well.
"We have multiple initiatives underway with our customers to retain United business and capitalize on our growth opportunity with Aetna. As we have said, given the relative size of each company's insured population, we expect the net result to negatively impact revenue and profit next year," he said
During the quarter, the company grew its collaboration with Walgreens to 16 stores with an expansion into Florida. LabCorp also plans to expand into other new markets later this year, King said.
LabCorp also made significant progress in the validation of a self-collection device in the quarter, drawing "strong concordance" between the test results collected with device and traditional venous blood draws, King said. The device is currently beta testing and the company aims to introduce it later this year.
King also addressed a recently announced ransomware attack that was uncovered the weekend of July 14. The company took certain systems offline as a result of the incident to protect patient information, King said. There is no evidence of theft or misuse of data at the company, King said, but the attack and the decision to take systems offline as a precautionary measure led to a disruption of service which required approximately one week for recovery.
The company has incurred costs associated with mitigating the attack, but is too early to determine the volume or financial impact, King said. The company does not expect the financial impact to be significant, and has cyber insurance, he noted. The incident is not expected to affect full-year financial guidance.
In the quarter LabCorp also launched Omniseq Advance precision medicine tool that includes immunotherapy biomarkers, and entered into a collaboration with Phillips on digital pathology diagnostics, King noted.
Revenue for LabCorp's Covance Drug Development business for the quarter was $1.05 billion, an increase of 31 percent over $808 million in the same quarter last year. The increase was primarily due to acquisitions, with additional benefit from organic growth and an approximately 180 basis point foreign currency translation.
LabCorp's SG&A costs in Q2 2018 grew 10 percent year over year to $395.2 million from $357.7 million. The firm also recorded $12.2 million in restructuring and other special charges during the recently completed quarter, down from $39.1 million a year ago.
Net earnings attributable to LabCorp for Q2 2018 were $233.8 million, or $2.27 per share, compared to $184.8 million, or $1.78 per share in the same quarter last year. Adjusted EPS was $2.98, up 23 percent from $2.43 in the same quarter last year, beating average analysts' estimate of $2.94.
The company's cash and cash equivalents at the end of the period were $221.4 million.
LabCorp narrowed its revenue growth guidance for 2018 to between 10.5 percent and 11.5 percent over 2017 revenue of $10.31 billion, compared to its previous guidance of 10 percent to 12 percent. The guidance includes the benefit of approximately 50 basis points of foreign currency translation.
Revenue growth in LabCorp Diagnostics is anticipated to be between 3 percent and 4.5 percent, compared to a previous guidance of between 3.5 percent and 5.5 percent.
Adjusted EPS is now expected to be in the range of $11.35 to $11.65. The company previously said the range would be between $11.30 and $11.70.
In mid-day trading, LabCorp's shares on the New York Stock Exchange were trading at $175.07, down 5 percent.